J.R. Ewing sat alone in his office one evening at Ewing Oil. He hears a noise in the hallway. Curious, he calls out: 'Who's there?' No answer.

He opens the door to his office and peers out.

Suddenly, three gunshots ring out. He falls to the floor.

So went the biggest cliffhanger in TV history. The show, 'Dallas,' aired the scene as part of its last episode in its second season in March 1980. In doing so, it raised the bar for all TV season finales to come -- everything from 'Friends' to 'Game Of Thrones' and beyond.

For eight long months after that show aired, millions of people speculated about who shot the famous fictional oilman.

Bets were placed, articles were written, and viewing parties were planned in anticipation of the first episode of season three on November 21, 1980, which was seen by 350 million people. (Spoiler alert: His sister-in-law did it.)

The agonizing anticipation is how investors sometimes feel right before earnings season -- that window of time that opens for a few weeks four times a year. It's then, and only then, that many public companies reveal how they did during the previous quarter. But just as you need to know what 'Southfork,' 'Charlene Tilton,' and 'Bobby's death' mean to really appreciate the drama on 'Dallas,' there are a few terms you need to know about earnings season before you can really appreciate the drama on Wall Street.

Fiscal Year

Earnings seasons are in January (after the fourth quarter ending in December), April (after the first quarter ending in March), July (after the second quarter ending in June), and October (after the third quarter ending in September). On March 31, for example, most companies close the books on January, February, and March. They take a few weeks to do the accounting, and then around April 15 (and this varies by a few weeks), they reveal the results.

This process repeats every quarter. Some companies' fiscal years don't run from January to December -- they might run from, say, July to June or October to September. Be sure you know which quarter is which for the company you're following.

Earnings Estimates

While we're waiting to find out how the quarter turns out, analysts are busy making predictions about the company's earnings per share.

To do this, they read the disclosure about a company, talk with management, visit the company, study the product and monitor the industry. Then, they create detailed mathematical models that reflect the facts and the analyst's judgment about what will happen next. Analysts disseminate these earnings estimates to their clients, who may use that information to buy or sell securities. You may need to be a client of the analyst's brokerage firm to get access to the report, but most earnings estimates are easily available online.


Companies often help analysts refine their predictions. They're not offering to do this because they're nice guys; they want to see what the analyst is thinking. This benefits the company, which knows what will happen to its stock if it misses the estimates, and so it behooves the company to correct the analyst if an estimate seems too high.

Likewise, it's often to the company's advantage to get the analyst to lower her estimate so the company can soundly beat it and look awesome. In some cases, a company might encourage an analyst to raise his estimate so it can publicize the fact that the analyst thinks even better of the company, which may spur investors to drive up the price.

The SEC's Regulation FD requires public companies to publicly disseminate guidance to analysts all at the same time, but some companies don't give guidance. They usually make that choice to reduce legal liability in the event that management's estimates are wrong. Some analysts claim that companies that do not offer any guidance often receive a 'break' when they miss earnings, because the market is aware that the company didn't give the analysts (and their resulting estimates) any feedback.

Earnings Announcements

Earnings announcements are the primary activity of earnings season -- they are how we find out 'who shot J.R.' Many companies announce their earnings via press releases (which contain key but minimal information) and via much meatier filings with the Securities and Exchange Commission (typically a Form 10-Q or 10-K and possibly additional forms).

The press releases are often the first pieces of definitive information investors and analysts get regarding a company's financial performance for the quarter. Public companies must submit a 10-Q 45 days after the end of each of the first three quarters of a company's fiscal year, but note: those financial statements do not have to be audited (that usually only happens at year-end).

Earnings Surprise

Just as everyone thought it was Sue Ellen who shot J.R. (it wasn't), sometimes the earnings announcement reveals unexpected financial results. For example, if analysts expect Company XYZ to report $0.05 in earnings per share for the quarter but the company reports $0.11 per share for the quarter, then we can say there was a $0.06 positive earnings surprise for Company XYZ. Sometimes the surprise is good; sometimes the surprise is bad.

Positive earnings surprises mean that the stock was undervalued. As a result, share prices usually increase after a positive earnings surprise. The opposite is also true. In either case, earnings surprises introduce volatility to the market.

The company isn't always the source of earnings surprises, though. Sometimes analyst estimates are flawed. This can be frustrating for companies that produce strong growth and good products but still suffer a decrease in stock price for failing to meet Wall Street's expectations.

Earnings Call

Next comes the earnings call, which is usually a conference call with the management team to discuss the results. During the call, management goes over significant points in the company's performance for the quarter, offers a little insight, and then takes questions from analysts. Earnings calls are accessible to anyone, and the company will usually provide the instructions for listening to the call in its press release. Though anyone can listen to the call, your chances of convincing the call operator to let you talk back to the management are virtually zero.

The Investing Answer: Earnings season is very exciting if you're an investor. If you know the lingo and know when to watch for new results, you can be one of the first to capitalize on the changes in stock prices that usually occur. To find out when a company is going to release earnings and have a conference call, simply go to the Investor Relations section of the company's website or consult one of the many websites that keep earnings call calendars.